Tuesday, January 19, 2010

'Projek Kerajaan Barisan Nasional' - Overpriced Hospital

Overpriced hospital, another public funds ’sink hole’

Proudly displayed on the signboard in front of the construction site of the Shah Alam Hospital is the tagline ‘Projek Kerajaan Barisan Nasional’ (A Barisan Nasional government project).



Like many other government projects, this one is well on the way to a familiar outcome involving the unproductive use of millions of ringgit of taxpayers' money.

Just last week, the Malaysian Anti-Corruption Commission had revealed that 60 percent of infrastructure funds in Sarawak, possibly amounting to billions of ringgit, have been siphoned off.

From what is known of the RM500 million Shah Alam Hospital project, it is estimated that as much as RM100 million could have already gone to waste.

Its construction was mooted 10 years ago as the state's second - and more accessible - general hospital, after the one in Klang.

“The new hospital can provide better services to people here besides reducing the burden on the overloaded Tengku Ampuan Rahimah Hospital (in Klang),” said former Selangor health, tourism and consumer affairs executive councillor Dr Lim Thuang Seng when announcing the project in 2007.

Awarded to newcomer Sunshine Fleet Sdn Bhd, the construction contract raised eyebrows from the onset.

Although initially announced as costing “about RM300 million”, the eventual contract has come to be worth a whopping RM482 million - a mark-up of RM182 million.

Sunshine Fleet was also awarded a separate earthworks contract of RM9 million, which has brought the total project cost to nearly half a billion ringgit. This is based on information recorded on the website of the Construction Industry Development Board.

The contract value is seen as high for a 300-bed hospital. Industry insiders insist that a hospital of that capacity could have been built for RM350 million, even after taking into account rising material costs.

In comparison, the 608-bed Serdang Hospital completed in 2004 cost about RM300 million while the 960-bed Selayang Hospital cost RM600 million, when it was completed in 1998 at the height of the East Asian financial crisis.

Speculation abounds about how the company, owned by the Selangor royal family and which has no track record in healthcare services or hospital construction, was awarded the contract.

An Internet search of several construction directories only lists Sunshine Fleet as contractors for 'renovations for office and homes'.

A search with the Companies Commission of Malaysia revealed that Sunshine Fleet is owned by the Selangor sultan's sister, Tengku Putri Arafiah ibni Sultan Abd Aziz Shah (70%), her son Putera Azamuddin Shah bin Abdul Aziz (10%), and her uncle Tengku Abdul Samad Shah ibni Sultan Salahuddin Abd Aziz Shah (20%).

The royal trio also makes up the board of directors of the company.

Job given to sub-contractor

Sunshine Fleet awarded full construction of the hospital to sub-contractor Isyoda (M) Sdn Bhd, an ailing construction firm.

Based on documents received by Malaysiakini, the sub-contract deal was for RM451 million, leaving Sunshine Fleet to pocket an immediate RM31 million.

On top of that, Isyoda was expected to pay a portion - as much as RM46 million - of the RM451 million to Sunshine Fleet as the work progressed, when payments were periodically issued by the Public Works Department (PWD).

The sub-contract deal was hailed by analysts at the time as a boon for Isyoda, in that it could help to revitalise the troubled construction firm.

However, they were wrong. Months after starting work on the hospital, Isyoda ran into trouble and had to withdraw from the project.

This may have also contributed to its parent Isyoda Corp Berhad de-listing from Bursa Malaysia, citing “the challenging environment surrounding the construction industry”.

Early this year, Isyoda filed winding-up proceedings against Sunshine Fleet in the Kuala Lumpur High Court.

This was however abandoned when both parties signed an agreement of mutual termination and release on May 21, 2009.

Related documents referred to the court case, stating that the proceedings were intended to recoup Isyoda's expenses for work done on the project, as well as for certain advances, loans and payments to Sunshine Fleet.

The two agreed to end their contract amicably with Sunshine Fleet refunding Isyoda all costs incurred, as well as payments received.

The amount which included “advances” and “loans” to Tengku Arafiah and expenses paid on Sunshine Fleet's behalf by Isyoda, totalled in excess of RM15 million.

However, after deducting the RM10 million which Isyoda had taken as an advance from the PWD, the sum was reduced to about RM5 million.

New sub-contractor takes over

In February this year, another sub-contractor GM Healthcare Sdn Bhd (GMH) took over the construction.

Industry insiders said the construction firm came to Sunshine Fleet's rescue by helping to pay off Isyoda.

GMH itself is a new player in the construction business, although its founders are industry veterans, said to have been involved in several prior projects, including the Selayang Hospital.

According to sources, GMH managed to reverse the roughly 80-day delay in construction under Isyoda to currently being three weeks ahead of schedule.

However, it may be sailing into troubled waters, just as Isyoda did. GMH is also beginning to suffer from the huge amounts of advances and expenses demanded by the turnkey contractor, Sunshine Fleet.

Sources close to the project said such appropriations of funds for “expenses” other than construction costs may “have an adverse economic effect on the project”.

GMH chief executive Elvin Toh, when contacted, confirmed that “this (situation) has been going on for some time”.

“If they have been doing this to us, they have also been doing it to others,” he said, although expressing surprise that the news has been leaked.

When contacted, an employee of Sunshine Fleet said its personnel are prohibited from revealing any information, and that all inquiries should be directed to the PWD, “which owns the project”.

PWD could not be immediately contacted for comment.

It is not clear whether the Shah Alam General Hospital will be able to open by its target date of November 2010.

Even if it does, it will not heal taxpayers sickened by yet another scandal of massive proportions.


Hazlan Zakaria/Malaysiakini

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